QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2006

OR

o

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934

For the transition period from to

Commission file number 1-8661

THE CHUBB CORPORATION

(Exact name of registrant as specified in its charter)

NEW JERSEY

13-2595722

(State or other jurisdiction of
incorporation or organization)

(I. R. S. Employer
Identification No.)

15 MOUNTAIN VIEW ROAD, WARREN, NEW JERSEY

07059

(Address of principal executive offices)

(Zip Code)

Registrants telephone number, including area code (908) 903-2000

Indicate by check mark whether the registrant (1) has filed all reports required to be filed
by Section 13 or 15 (d) of the Securities Exchange Act of 1934 during the preceding 12 months (or
for such shorter period that the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.

YES þ NO o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated
filer, or a non-accelerated filer. See definition of accelerated filer and large accelerated
filer in Rule 12b-2 of the Exchange Act.

Large accelerated filer þ Accelerated filer o Non-accelerated filer o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of
the Exchange Act).

YES o NO þ

The number of shares of common stock outstanding as of June 30, 2006 was 410,809,367.

THE CHUBB CORPORATION
INDEX

Page Number

Part I. Financial Information:

Item 1 - Financial Statements:

Consolidated Statements of Income for the
Three Months and Six Months Ended June 30, 2006 and 2005

1

Consolidated Balance Sheets as of
June 30, 2006 and December 31, 2005

2

Consolidated Statements of Comprehensive Income for the
Three Months and Six Months Ended June 30, 2006 and 2005

3

Consolidated Statements of Cash Flows for the
Six Months Ended June 30, 2006 and 2005

Change in Unrealized Appreciation or
Depreciation of Investments, Net of Tax

(256

)

299

(480

)

29

Foreign Currency Translation Gains
(Losses), Net of Tax

8

(36

)

6

(29

)

(248

)

263

(474

)



Comprehensive Income

$

350

$

758

$

796

$

965

See Notes to Consolidated Financial Statements.

Page 4

THE CHUBB CORPORATION

CONSOLIDATED STATEMENTS OF CASH FLOWS
SIX MONTHS ENDED JUNE 30

2006

2005

(in millions)

Cash Flows from Operating Activities

Net Income

$

1,270

$

965

Adjustments to Reconcile Net Income to Net Cash
Provided by Operating Activities

Increase in Unpaid Losses and Loss Expenses, Net

721

786

Increase in Unearned Premiums, Net

17

115

Increase in Premiums Receivable

(134

)

(122

)

Decrease (Increase) in Reinsurance Recoverable
on Paid Losses

(234

)

12

Change in Deferred Income Tax

116

79

Amortization of Premiums and Discounts on
Fixed Maturities

115

106

Depreciation

43

48

Realized Investment Gains

(148

)

(98

)

Other, Net

(424

)

1

Net Cash Provided by Operating Activities

1,342

1,892

Cash Flows from Investing Activities

Proceeds from Sales of Fixed Maturities

1,603

3,305

Proceeds from Maturities of Fixed Maturities

781

857

Proceeds from Sales of Equity Securities

311

277

Purchases of Fixed Maturities

(3,546

)

(5,751

)

Purchases of Equity Securities

(502

)

(389

)

Decrease (Increase) in Short Term Investments, Net

440

(154

)

Increase (Decrease) in Net Payable from
Security Transactions Not Settled

211

(2

)

Purchases of Property and Equipment, Net

(33

)

(19

)

Other, Net



71

Net Cash Used in Investing Activities

(735

)

(1,805

)

Cash Flows from Financing Activities

Decrease in Funds Held Under Deposit Contracts

(15

)

(253

)

Proceeds from Issuance of Common Stock Under
Stock-Based Employee Compensation Plans

143

318

Repurchase of Shares

(539

)



Dividends Paid to Shareholders

(194

)

(159

)

Net Cash Used in Financing Activities

(605

)

(94

)

Net Increase (Decrease) in Cash

2

(7

)

Cash at Beginning of Year

36

42

Cash at End of Period

$

38

$

35

See Notes to Consolidated Financial Statements.

Page 5

THE CHUBB CORPORATION

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1) General

The accompanying consolidated financial statements have been prepared in accordance with
U.S. generally accepted accounting principles and include the accounts of The Chubb
Corporation (Chubb) and its subsidiaries (collectively, the Corporation). Significant
intercompany transactions have been eliminated in consolidation.

The amounts included in this report are unaudited but include those adjustments,
consisting of normal recurring items, that management considers necessary for a fair
presentation. These consolidated financial statements should be read in conjunction with the
consolidated financial statements and related notes in the Notes to Consolidated Financial
Statements included in the Corporations 2005 Annual Report on Form 10-K.

Share and per share amounts have been retroactively adjusted to reflect the two-for-one
stock split payable to Chubbs shareholders of record on March 31, 2006.

2) Adoption of New Accounting Pronouncements

Effective January 1, 2006, the Corporation adopted Statement of Financial Accounting
Standards (SFAS) No. 123 (revised 2004), Share-Based Payment, which revised SFAS No. 123,
Accounting for Stock-Based Compensation. SFAS No. 123(R) requires companies to adopt the
fair value method of accounting for stock-based employee compensation plans. The fair value
method of accounting for stock-based employee compensation plans as defined in SFAS No.
123(R) is similar in most respects to the fair value method defined in SFAS No. 123. Since
the Corporation had previously adopted the fair value method of accounting for stock-based
employee compensation plans, the adoption of SFAS No. 123(R) did not have a significant
effect on the Corporations financial position or results of operations.

Effective January 1, 2006, the Corporation adopted Financial Accounting Standards Board
Staff Position (FSP) Nos. 115-1 and 124-1, The Meaning of Other-Than-Temporary Impairment and
Its Application to Certain Investments. The FSP addresses the determination as to when an
investment is considered impaired, whether that impairment is other-than-temporary and the
measurement of an impairment loss. The FSP clarifies that an investor shall recognize an
impairment loss when the impairment is deemed to be other-than-temporary even if a decision
to sell the impaired security has not been made. The FSP nullifies certain requirements and
carries forward other requirements of Emerging Issues Task Force Issue No. 03-1, The Meaning
of Other-Than-Temporary Impairment and Its Application to Certain Investments. The
implementation of the guidance in the FSP did not have a significant effect on the
Corporations financial position or results of operations.

Page 6

3) Investments

Short term investments, which have an original maturity of one year or less, are carried
at amortized cost which approximates market value. Fixed maturities classified as
held-to-maturity are carried at amortized cost. Fixed maturities classified as
available-for-sale and equity securities are carried at market value as of the balance sheet
date.

The net change in unrealized appreciation or depreciation of investments carried at
market value was as follows:

Periods Ended June 30

Second Quarter

Six Months

2006

2005

2006

2005

(in millions)

Change in unrealized appreciation of
equity securities

$

(6

)

$

30

$

20

$

18

Change in unrealized appreciation or
depreciation of fixed maturities

(297

)

430

(667

)

26

(303

)

460

(647

)

44

Deferred income tax (credit)

(47

)

161

(167

)

15

Change in unrealized appreciation or
depreciation of investments, net

$

(256

)

$

299

$

(480

)

$

29

4) Debt

In June 2003, Chubb issued $460 million of unsecured 2.25% senior notes due August 16,
2008 and 18.4 million purchase contracts to purchase Chubbs common stock on or before August
16, 2006. The notes and purchase contracts were issued together in the form of 7% equity
units. Each equity unit initially represented one purchase contract and $25 principal amount
of senior notes. In May 2006, the notes were successfully remarketed as required by their
terms. The interest rate on the notes was reset to 5.472% from 2.25%, effective May 16,
2006. The remarketed notes are due August 16, 2008. Chubb did not receive any proceeds from
the remarketing of the notes. Instead, the proceeds from the remarketing will be used to
satisfy the holders obligation under the purchase contracts to purchase Chubbs common stock
on August 16, 2006.

Page 7

5) Segments Information

The principal business of the Corporation is the sale of property and casualty
insurance. The profitability of the property and casualty insurance business depends on the
results of both underwriting operations and investments, which are viewed as two distinct
operations. The underwriting operations are managed and evaluated separately from the
investment function.

The property and casualty insurance subsidiaries (P&C Group) underwrite most lines of
property and casualty insurance. Underwriting operations consist of four separate business
units: personal insurance, commercial insurance, specialty insurance and reinsurance assumed.
The personal segment targets the personal insurance market. The personal classes include
automobile, homeowners and other personal coverages. The commercial segment includes those
classes of business that are generally available in broad markets and are of a more commodity
nature. Commercial classes include multiple peril, casualty, workers compensation and
property and marine. The specialty segment includes those classes of business that are
available in more limited markets since they require specialized underwriting and claim
settlement. Specialty classes include professional liability coverages and surety. The
reinsurance assumed business is effectively in runoff following the sale, in December 2005,
of the ongoing business to a Bermuda based reinsurance company, Harbor Point Limited. Harbor
Point has the right for a transition period of up to two years to underwrite specific
reinsurance business on the P&C Groups behalf. The P&C Group retains a portion of this
business and cedes the balance to Harbor Point.

Corporate and other includes investment income earned on corporate invested assets,
corporate expenses and the Corporations real estate and other non-insurance subsidiaries.

Corporate and other includes the results of Chubb Financial Solutions (CFS), which were
previously reported separately. CFSs business was primarily structured credit derivatives,
principally as a counterparty in portfolio credit default swaps. CFS has been in run-off
since April 2003.

Page 8

Revenues and income before income tax of the operating segments were as follows:

Periods Ended June 30

Second Quarter

Six Months

2006

2005

2006

2005

(in millions)

Revenues

Property and casualty insurance
Premiums earned

Personal insurance

$

844

$

801

$

1,681

$

1,594

Commercial insurance

1,255

1,268

2,534

2,525

Specialty insurance

742

727

1,491

1,449

Total insurance

2,841

2,796

5,706

5,568

Reinsurance assumed

129

223

283

486

2,970

3,019

5,989

6,054

Investment income

368

332

725

653

Total property and casualty
insurance

3,338

3,351

6,714

6,707

Corporate and other

65

48

89

96

Realized investment gains

42

53

148

98

Total revenues

$

3,445

$

3,452

$

6,951

$

6,901

Income (loss) before income tax
Property and casualty insurance
Underwriting

Personal insurance

$

154

$

133

$

338

$

267

Commercial insurance

171

168

427

337

Specialty insurance

82

8

170

(22

)

Total insurance

407

309

935

582

Reinsurance assumed



17

16

58

407

326

951

640

Increase in deferred policy
acquisition costs

37

4

29

9

Underwriting income

444

330

980

649

Investment income

358

325

706

638

Other income (charges)

1

1

6

(2

)

Total property and casualty
insurance

803

656

1,692

1,285

Corporate and other loss

(11

)

(25

)

(54

)

(87

)

Realized investment gains

42

53

148

98

Total income before income tax

$

834

$

684

$

1,786

$

1,296

Page 9

6) Contingent Liabilities

Chubb and certain of its subsidiaries are involved in the ongoing investigations of
business practices in the property and casualty insurance industry relating to, among other
things, (1) the payment of contingent commissions to brokers and agents and (2) loss
mitigation and finite reinsurance arrangements. In connection with these investigations,
Chubb and certain of its subsidiaries have received subpoenas and other information requests
from the Attorneys General and insurance regulators of several states, as well as from
several foreign regulatory authorities, the U.S. Securities and Exchange Commission and the
U.S. Attorney for the Southern District of New York. The Corporation is cooperating fully in
such investigations. Although no regulatory action has been initiated against the
Corporation, it is possible that one or more regulatory authorities will bring an action
against the Corporation with respect to some or all of the issues that are the focus of these
ongoing investigations. In May 2006, the Corporation was informed by the Attorney General of
the State of Ohio that he intended to file an action against several industry participants,
including the Corporation, with respect to certain of these issues. No such action has been filed to
date.

Purported class actions arising out of the investigations into the payment of contingent
commissions to brokers and agents have been filed in a number of state and federal courts.
On August 1, 2005, Chubb and certain of its subsidiaries were named in a putative class
action entitled In re Insurance Brokerage Antitrust Litigation in the U.S. District Court for
the District of New Jersey. This action, brought against several brokers and insurers on
behalf of a class of persons who purchased insurance through the broker defendants, asserts
claims under the Sherman Act and state law and the Racketeer Influenced and Corrupt
Organizations Act (RICO) arising from the alleged unlawful use of contingent commission
agreements. The complaint seeks treble damages, injunctive and declaratory relief, and
attorneys fees.

Chubb and certain of its subsidiaries have also been named as defendants in two
purported class actions relating to allegations of unlawful use of contingent commission
arrangements that were originally filed in state court. The first was filed on February 16,
2005 in Seminole County, Florida. The second was filed on May 17, 2005 in Essex County,
Massachusetts. Both cases were removed to federal court and then transferred by the Judicial
Panel on Multidistrict Litigation to the U.S. District Court for the District of New Jersey
for consolidation with the In re Insurance Brokerage Antitrust Litigation. In December 2005,
Chubb and certain of its subsidiaries were named in an action similar to the In re Insurance
Brokerage Antitrust Litigation. The action is pending in the same court and has been
assigned to the judge who is presiding over the In re Insurance Brokerage Antitrust
Litigation. The complaint has not yet been served in this matter. Separately, in April
2006, Chubb and one of its subsidiaries were named in an action similar to the In re
Insurance Brokerage Antitrust Litigation. This action is pending in the U.S. District Court
for the Northern District of Georgia. In these actions, the plaintiffs generally allege that
the defendants unlawfully used contingent commission agreements. The actions seek
unspecified damages and attorneys fees.

The Corporation believes it has substantial defenses to all of the aforementioned legal
proceedings and intends to defend the actions
vigorously.

Page 10

The Corporation cannot at this time predict the ultimate outcome of the aforementioned
investigations and legal proceedings, including any potential amounts that the Corporation
may be required to pay in connection with them. However, it is possible that such payments
could have a material adverse effect on the Corporations results of operations in particular
quarterly or annual periods.

7) Earnings Per Share

The following table sets forth the computation of basic and diluted earnings per share:

Additional shares from assumed
issuance of common stock upon
settlement of purchase contracts
and mandatorily exercisable
warrants

3.7

4.4

3.5

3.7

Weighted average number of common
shares and potential common shares
assumed outstanding for computing
diluted earnings per share

424.1

404.5

424.1

400.7

Diluted earnings per share

$

1.41

$

1.23

$

2.99

$

2.41

Page 11

8) Shareholders Equity

On February 8, 2006, the Board of Directors authorized the cancellation of all
treasury shares, which were thereupon restored to the status of authorized but unissued
common shares. The change had no effect on total shareholders equity.

On March 3, 2006, the Board of Directors approved a two-for-one stock split payable to
shareholders of record on March 31, 2006. In connection with the stock split, the Board of
Directors approved a proportionate increase in the number of authorized shares of Chubbs
common stock from 600 million shares to 1.2 billion shares.

The activity of Chubbs common stock was as follows:

Six Months Ended

June 30

2006

2005

Common stock issued

Balance, beginning of year

210,432,298

195,803,824

Two-for-one stock split

210,432,298



Treasury shares cancelled

(7,887,800

)



Repurchase of shares

(5,898,362

)



Share activity under stock-based
employee compensation plans

3,730,933

2,535,127

Balance, end of period

410,809,367

198,338,951

Treasury stock

Balance, beginning of year

1,393,900

3,127,282

Two-for-one stock split

1,393,900



Repurchase of shares

5,100,000



Cancellation of shares

(7,887,800

)



Share activity under stock-based
employee compensation plans



(3,127,282

)

Balance, end of period





Common stock outstanding, end of period

410,809,367

198,338,951

Page 12

Item 2 

Managements Discussion and Analysis of Financial Condition and Results
of Operations for the Six Months Ended June 30, 2006 and 2005 and for
the Quarters Ended June 30, 2006 and 2005

Certain statements in this document are forward-looking statements as that term is defined
in the Private Securities Litigation Reform Act of 1995 (PSLRA). These forward-looking statements
are made pursuant to the safe harbor provisions of the PSLRA and include our loss reserve estimates
and reinsurance recoverables; reinsurance pricing; commercial insurance rates; the impact of
regulatory investigations and developments on our business; our estimated CFS credit derivatives
exposure; the possible recognition of additional impairment losses if real estate is not sold or
does not perform as contemplated and the effect thereof on our results of operations; the
repurchase of Chubbs common stock under its share repurchase program; continuation of our
financial strength and credit ratings; and the funding of Chubbs future liquidity needs.
Forward-looking statements are made based upon managements current expectations and beliefs
concerning trends and future developments and their potential effects on us. These statements are
not guarantees of future performance. Actual results may differ materially from those suggested by
forward-looking statements as a result of risks and uncertainties, which include, among others,
those discussed or identified from time to time in our public filings with the Securities and
Exchange Commission and those associated with:



global political conditions and the occurrence of terrorist
attacks, including any nuclear, biological, chemical or
radiological events;



the effects of the outbreak or escalation of war or hostilities;



premium pricing and profitability or growth estimates overall or
by lines of business or geographic area, and related expectations
with respect to the timing and terms of any required regulatory
approvals;



adverse changes in loss cost trends;



the ability to retain existing business;



our expectations with respect to cash flow projections and
investment income and with respect to other income;



the adequacy of loss reserves, including:



our expectations relating to reinsurance recoverables;



the willingness of parties, including us, to settle disputes;



developments in judicial decisions or regulatory or legislative
actions relating to coverage and liability, in particular, for
asbestos, toxic waste and other mass tort claims;



development of new theories of liability;



our estimates relating to ultimate asbestos liabilities;



the impact from the bankruptcy protection sought by various asbestos
producers and other related businesses;



the effects of proposed asbestos liability legislation, including the
impact of claims patterns arising from the possibility of legislation
and those that may arise if legislation is not passed;



the availability and cost of reinsurance coverage;



the occurrence of significant weather-related or other natural or
human-made disasters, particularly in locations where we have
concentrations of risk;

Page 13



the impact of economic factors on companies on whose behalf we
have issued surety bonds, and in particular, on those companies
that have filed for bankruptcy or otherwise experienced
deterioration in creditworthiness;



the effects of disclosures by, and investigations of, public
companies relating to possible accounting irregularities,
practices in the financial services industry and other corporate
governance issues, including:



claims and litigation arising out of stock option backdating,
spring loading and other option grant practices by public companies;



the effects on the capital markets and the markets for directors and
officers and errors and omissions insurance;



claims and litigation arising out of actual or alleged accounting or
other corporate malfeasance by other companies;



claims and litigation arising out of practices in the financial
services industry;



legislative or regulatory proposals or changes;



the effects of investigations into market practices, in particular
contingent commissions and loss mitigation and finite reinsurance
arrangements, in the property and casualty insurance industry
together with any legal or regulatory proceedings, related
settlements and industry reform or other changes with respect to
contingent commissions or otherwise arising therefrom;



the impact of legislative and regulatory developments on our
business, including those relating to terrorism and large-scale
catastrophes;



any downgrade in our claims-paying, financial strength or other
credit ratings;



the ability of our subsidiaries to pay us dividends;



general economic and market conditions including:



changes in interest rates, market credit spreads and the performance
of the financial markets;

The Corporation assumes no obligation to update any forward-looking information set forth in
this document, which speak as of the date hereof.

Page 14

CRITICAL ACCOUNTING ESTIMATES AND JUDGMENTS

The consolidated financial statements include amounts based on informed estimates and
judgments of management for transactions that are not yet complete. Such estimates and judgments
affect the reported amounts in the financial statements. Those estimates and judgments that were
most critical to the preparation of the financial statements involved the determination of loss
reserves and the recoverability of related reinsurance recoverables and the recoverability of the
carrying value of real estate properties. These estimates and judgments, which are discussed
within the following analysis of our results of operations, require the use of assumptions about
matters that are highly uncertain and therefore are subject to change as facts and circumstances
develop. If different estimates and judgments had been applied, materially different amounts might
have been reported in the financial statements.

Overview

The following highlights do not address all of the matters covered in the other sections of
Managements Discussion and Analysis of Financial Condition and Results of Operations or contain
all of the information that may be important to Chubbs shareholders or the investing public. This
overview should be read in conjunction with the other sections of Managements Discussion and
Analysis of Financial Condition and Results of Operations.



Net income was $1.3 billion in the first six months of 2006 and $598 million
in the second quarter compared with $965 million and $495 million, respectively, in the
comparable periods of 2005. The increase in net income in the 2006 periods was driven
by substantially higher underwriting income in our property and casualty insurance
business.



Premiums written decreased by 3% in the first six months of 2006 and 1% in
the second quarter. Premiums in our insurance business increased 1% in the first six
months of 2006 and 3% in the second quarter. Rates were generally stable, but were
under competitive pressure in some classes of business. Premiums in our reinsurance
assumed business decreased 48% in the first six months of 2006 and 51% in the second
quarter, reflecting the sale of the ongoing business.



Underwriting results were exceptionally profitable in the first six months
and second quarter of 2006 as evidenced by the combined loss and expense ratio of 84.0%
and 85.2%, respectively, compared with 88.9% and 88.3%, respectively, in the
corresponding periods of 2005.



Property and casualty investment income after tax increased by 11% in the
first six months of 2006 and 10% in the second quarter. For more information on this
non-GAAP financial measure, see Property and Casualty Insurance  Investment Results.

Page 15

A summary of our consolidated net income is as follows:

Periods Ended June 30

Second Quarter

Six Months

2006

2005

2006

2005

(in millions)

Property and Casualty Insurance

$

803

$

656

$

1,692

$

1,285

Corporate and Other

(11

)

(25

)

(54

)

(87

)

Realized Investment Gains

42

53

148

98

Consolidated Income Before Income Tax

834

684

1,786

1,296

Federal and Foreign Income Tax

236

189

516

331

Consolidated Net Income

$

598

$

495

$

1,270

$

965

Property and Casualty Insurance

A summary of the results of operations of our property and casualty insurance business is as
follows:

Periods Ended June 30

Second Quarter

Six Months

2006

2005

2006

2005

(in millions)

Underwriting

Net Premiums Written

$

3,081

$

3,113

$

6,006

$

6,169

Increase in Unearned Premiums

(111

)

(94

)

(17

)

(115

)

Premiums Earned

2,970

3,019

5,989

6,054

Losses and Loss Expenses

1,679

1,819

3,297

3,654

Operating Costs and Expenses

876

869

1,726

1,748

Increase in Deferred Policy
Acquisition Costs

(37

)

(4

)

(29

)

(9

)

Dividends to Policyholders

8

5

15

12

Underwriting Income

444

330

980

649

Investments

Investment Income Before Expenses

368

332

725

653

Investment Expenses

10

7

19

15

Investment Income

358

325

706

638

Other Income (Charges)

1

1

6

(2

)

Property and Casualty Income Before Tax

$

803

$

656

$

1,692

$

1,285

Property and Casualty Investment Income After Tax

$

288

$

261

$

567

$

513

Income before tax from our property and casualty business was substantially higher in the
first six months and second quarter of 2006 compared with the comparable periods of 2005. The
increase was driven by significantly higher underwriting income, particularly in our specialty
insurance business unit. Results in the 2006 periods also benefited from higher investment income.

Page 16

The profitability of the property and casualty insurance business depends on the results of
both underwriting operations and investments. We view these as two distinct operations since the
underwriting functions are managed separately from the investment function. Accordingly, in
assessing our performance, we evaluate underwriting results separately from investment results.

Underwriting Results

We evaluate the underwriting results of our property and casualty insurance business in the
aggregate and also for each of our separate business units.

Net Premiums Written

Property and casualty net premiums written were $6.0 billion in the first six months of 2006
and $3.1 billion in the second quarter, representing decreases of 3% and 1%, respectively, compared
with the same periods of 2005.

Net premiums written by business unit were as follows:

Six Months Ended

Quarter Ended

June 30

% Incr.

June 30

% Incr.

2006

2005

(Decr.)

2006

2005

(Decr.)

(in millions)

(in millions)

Personal insurance

$

1,726

$

1,627

6

%

$

934

$

871

7

%

Commercial insurance

2,619

2,633

(1

)

1,294

1,268

2

Specialty insurance

1,419

1,442

(2

)

739

743

(1

)

Total insurance

5,764

5,702

1

2,967

2,882

3

Reinsurance assumed

242

467

(48

)

114

231

(51

)

Total

$

6,006

$

6,169

(3

)

$

3,081

$

3,113

(1

)

Net premiums from our insurance business increased 1% in the first six months of 2006 and 3%
in the second quarter compared with the same periods of 2005. Premiums in the United States, which
represent more than 75% of our insurance premiums, increased 1% in the first six months and 2% in
the second quarter. Premiums outside the U.S. increased 1% in the first six months and 5% in the
second quarter; in local currencies, such premiums grew 2% and 1%, respectively.

The modest overall growth in net premiums written in our insurance business reflected our
continued emphasis on underwriting and pricing discipline in a competitive market environment.
Rates were generally stable, but were under competitive pressure in some classes of business. We
continued to retain
a high percentage of our existing customers and to renew these accounts at adequate prices. In
addition, while we continued to be selective, we found opportunities to write new business at
acceptable rates.

Net reinsurance assumed premiums decreased by 48% in the first six months of 2006 and 51% in
the second quarter compared with the same periods of 2005. The premium decline was the result of
our sale of the ongoing reinsurance assumed business in December 2005.

Page 17

Reinsurance Ceded

Our premiums written are net of amounts ceded to reinsurers who assume a portion of the risk
under the insurance policies we write that are subject to the reinsurance.

As a result of the substantial losses incurred by reinsurers from the catastrophes in the
latter half of 2005, the cost of reinsurance has increased significantly, particularly for property
coverages, and there is less reinsurance capacity in the marketplace. In addition, the
availability of reinsurance for certain coverages, such as terrorism, continues to be limited and
expensive.

The major components of our reinsurance program were renewed in April 2006. On our casualty
clash treaty, which operates like a catastrophe treaty, our initial retention remained at $75
million. We reduced the reinsurance coverage at the top of the program by $50 million and
increased our participation in the program. This treaty now provides coverage of approximately 55%
of losses between $75 million and $150 million per insured event.

On our commercial property per risk treaty, we increased our retention from $15 million to $25
million. This treaty now provides $425 million of coverage per risk in excess of our retention.

Our property catastrophe treaty for events in the United States was modified to increase our
initial retention from $250 million to $350 million and to increase our participation in the
program. At the same time, we increased
the reinsurance coverage in the northeastern part of the country by $400 million, enhancing our
protection in the region where we have our greatest exposure. The program now provides coverage of
approximately 75% of losses (net of recoveries from other available reinsurance) between $350
million and $1.3 billion, with additional coverage of 80% of losses between $1.3 billion and $2.05
billion in the northeastern part of the country.

Our property catastrophe treaty for events outside the United States was modified to increase
our initial retention from $50 million to $75 million. The treaty now provides coverage of
approximately 90% of losses (net of recoveries from other available reinsurance) between $75
million and $275 million.

Our property reinsurance treaties generally contain terrorism exclusions for acts perpetrated
by foreign terrorists. Since September 2001, we have
changed our underwriting strategies to address terrorism and the limited availability of terrorism
reinsurance.

While the cost of our U.S. property catastrophe treaty will increase, we expect that the
overall ceded reinsurance premiums in 2006 for our insurance business will be about the same as those in
2005.

Page 18

Profitability

The combined loss and expense ratio, expressed as a percentage, is the key measure of
underwriting profitability traditionally used in the property and casualty insurance business.
Management evaluates the performance of our underwriting operations and of each of our business
units using, among other measures, the combined loss and expense ratio calculated in accordance
with statutory accounting principles. It is the sum of the ratio of losses and loss expenses to
premiums earned (loss ratio) plus the ratio of statutory underwriting expenses to premiums written
(expense ratio) after reducing both premium amounts by dividends to policyholders. When the
combined ratio is under 100%, underwriting results are generally considered profitable; when the
combined ratio is over 100%, underwriting results are generally considered unprofitable.

Statutory accounting principles applicable to property and casualty insurance companies differ
in certain respects from generally accepted accounting principles (GAAP). Under statutory
accounting principles, policy acquisition and other underwriting expenses are recognized
immediately, not at
the time premiums are earned. Management uses underwriting results determined
in accordance with GAAP, among other measures, to assess the overall performance
of our underwriting operations. To convert statutory underwriting results to a GAAP basis, policy
acquisition expenses are deferred and amortized over the period in which the related premiums are
earned. Underwriting income determined in accordance with GAAP is defined as premiums earned less
losses and loss expenses incurred and GAAP underwriting expenses incurred.

Underwriting results were highly profitable in the first six months and second quarter of 2006
and 2005. Results in 2006 were exceptionally profitable, with each of our insurance business units
being more profitable in the first six months compared with the corresponding period of 2005. The
combined loss and expense ratio for our overall property and casualty business was as follows:

Periods Ended June 30

Six Months

Second Quarter

2006

2005

2006

2005

Loss ratio

55.2

%

60.5

%

56.7

%

60.3

%

Expense ratio

28.8

28.4

28.5

28.0

Combined ratio

84.0

%

88.9

%

85.2

%

88.3

%

Catastrophe losses of $101 million in the first six months of 2006 were offset in part by a
$20 million reduction in reinsurance reinstatement premium costs related to Hurricane Katrina. The
net impact accounted for 1.4 percentage points of the combined ratio. Catastrophe losses in the
first six months of 2005 were $41 million, which represented 0.7 of a percentage point of the
combined ratio. Catastrophe losses were $80 million in the second quarter of 2006, which
represented 2.7 percentage points of the combined ratio, compared with $21 million or 0.7 of a
percentage point in 2005. The catastrophe losses in 2006 related to a number of storms and
tornados in the United States.

The loss ratio improved significantly in the first six months and second quarter of 2006
compared with the same periods in 2005, despite the higher catastrophe losses. The improvement
reflected the favorable experience resulting from our disciplined underwriting in recent years.

Page 19

The expense ratio increased in the first six months and second quarter of 2006 compared with
the same periods in 2005 as net premiums written decreased whereas salaries and operating costs
increased. The increase in salaries and operating costs in the first six months of 2006 was offset
in part by lower accrued contingent commissions. We accrued contingent commissions in the first
six months of 2005 at a higher rate than we ultimately paid after we concluded the agreements with
our brokers and agents.

Review of Underwriting Results by Business Unit

Personal Insurance

Net premiums from personal insurance coverages, which represented 29% of premiums written in
the first six months of 2006, increased by 6% in the first six months of 2006 and 7% in the second
quarter compared with the same periods in 2005. Net premiums written for the classes of business
within the personal insurance segment were as follows:

Six Months Ended

Quarter Ended

June 30

June 30

2006

2005

% Incr.

2006

2005

% Incr.

(in millions)

(in millions)

Automobile

$

337

$

317

6%

$

182

$

171

6%

Homeowners

1,097

1,020

8

609

568

7

Other

292

290

1

143

132

8

Total personal

$

1,726

$

1,627

6

$

934

$

871

7

Premium growth was driven by our homeowners business due to increased insurance-to-value and
slightly higher rates. The in-force policy count for this class was unchanged during the first six
months of 2006. Premiums from our personal automobile business increased as a result of selective
growth initiatives outside the United States. Automobile premiums in the U.S. declined due to our
maintaining underwriting discipline in a more competitive marketplace. Our other personal
business, which includes insurance for excess liability, yacht and accident coverages, had minimal
growth in the first six months of 2006 due to lower premiums in our U.S. accident business compared
with the same period in 2005.

Our personal insurance business produced highly profitable underwriting results in the first
six months and second quarter of both 2006 and 2005. The combined loss and expense ratios for the
classes of business within the personal insurance segment were as follows:

Periods Ended June 30

Six Months

Second Quarter

2006

2005

2006

2005

Automobile

87.9

%

95.3

%

85.9

%

95.2

%

Homeowners

73.1

76.9

72.6

73.7

Other

91.6

89.1

92.6

91.6

Total personal

79.1

%

82.7

%

78.5

%

81.0

%

Our personal automobile business produced more profitable results in the first six months and
second quarter of 2006 compared with the same periods in 2005. The improvement was due to a
combination of lower claim frequency and modest favorable loss development related to prior
accident years.

Page 20

Homeowners results were highly profitable in the first six months and second quarter of 2006
and 2005, but more so in 2006 despite higher catastrophe losses. Results in both years benefited
from better pricing and a reduction in water damage losses primarily through contract wording
changes related to mold coverage and loss remediation measures that we have implemented over the
past few years. Results in 2006 also benefited from fewer non-catastrophe claims compared with the
first six months of 2005. Catastrophe losses represented 6.7 percentage points of the combined
ratio for this class in the first six months of 2006 and 7.6 percentage points in the second
quarter compared with 2.5 percentage points in both comparable periods of 2005.

Other personal coverages produced profitable results in the first six months and second
quarter of 2006 and 2005; however, results were somewhat less profitable in the 2006 periods due to
higher incurred losses in the excess liability component.

Commercial Insurance

Net premiums from commercial insurance, which represented 43% of our premiums written in the
first six months of 2006, decreased by 1% in the first six months of 2006 and increased by 2% in
the second quarter compared with the same periods a year ago. Net premiums written for the classes
of business within the commercial insurance segment were as follows:

Six Months Ended

Quarter Ended

June 30

% Incr.

June 30

% Incr.

2006

2005

(Decr.)

2006

2005

(Decr.)

(in millions)

(in millions)

Multiple peril

$

645

$

641

1%

$

319

$

305

5%

Casualty

895

910

(2)

455

458

(1)

Workers compensation

472

496

(5)

216

218

(1)

Property and marine

607

586

4

304

287

6

Total commercial

$

2,619

$

2,633

(1)

$

1,294

$

1,268

2

Premium growth in our commercial insurance business has been constrained by an increasingly
competitive marketplace. However, after declining 3% in the first quarter of 2006, premiums grew
2% in the second quarter. Property and marine premiums in the first six months of 2006 benefited
from a $20 million reduction in reinsurance reinstatement premium costs in the first quarter
related to Hurricane Katrina. Rates were generally stable in the first six months of 2006, but
were under competitive pressure in some classes of business. Retention levels remained strong, but
were slightly lower than those in the first six months of 2005. New business volume in the first
six months was also down from 2005 levels, reflecting continued competition. However, new business
in the second quarter was up from that in the first quarter and was at about the same level as that
in the second quarter of 2005. We continued to maintain our underwriting discipline in the
competitive market, renewing business and writing new business only where we were able to get
acceptable rates and appropriate terms and conditions. As a result of insurers paying higher
reinsurance prices while retaining more risk and as the new industry catastrophe models are
implemented, we expect to see a generally stable commercial rate environment in the second half of
2006.

Page 21

Our commercial insurance business produced highly profitable underwriting results in the first
six months and second quarter of 2006 and 2005. These profitable results were due in large part to
the cumulative effect of price increases, better terms and conditions and more stringent risk
selection in recent years. Results in both years also benefited from low property losses.

The combined loss and expense ratios for the classes of business within the commercial
insurance segment were as follows:

Periods Ended June 30

Six Months

Second Quarter

2006

2005

2006

2005

Multiple peril

75.4

%

82.8

%

80.4

%

83.3

%

Casualty

93.4

97.3

92.4

100.9

Workers compensation

81.3

84.9

84.7

84.1

Property and marine

73.2

70.8

80.9

71.3

Total commercial

82.1

%

85.3

%

85.4

%

86.7

%

Multiple peril results were highly profitable in the first six months and second quarter of
2006 and 2005, particularly in 2006 despite higher catastrophe
losses. The more profitable results in 2006 were driven by improvement in the
liability component of this business. The property component was exceptionally profitable in the
first six months of both years due to very favorable loss experience. Results in the property
component were less profitable in the second quarter of 2006 than in the comparable period in 2005
due to higher catastrophe losses. Catastrophe losses represented 4.3 points of the combined ratio
for this class in the first six months of 2006 and 9.0 points in the second quarter. Catastrophe
losses were negligible for this class in the corresponding periods of 2005.

Our casualty business produced profitable results in the first six months of 2006 and 2005,
but more so in 2006 due primarily to improvement in the automobile component of this business.
While the automobile component was highly profitable in both years, results were exceptionally
profitable in the second quarter of 2006. The primary liability component was similarly profitable
in both years. The excess liability component produced similarly unprofitable results in 2006 and
2005; results in the second quarter of both years were adversely affected by several large losses
related to older accident years.

Workers compensation results were highly profitable in the first six months and second
quarter of 2006 and 2005. Results in both years benefited from our disciplined risk selection
during the past several years.

Property and marine results were highly profitable in the first six months and second quarter
of both years, but more so in 2005. Results in both years benefited from few large losses.
Results in 2006 also benefited from the $20 million reduction in reinsurance reinstatement premium
costs in the first quarter related to Hurricane Katrina. As a result, catastrophes had a 2.4
percentage point favorable impact on the combined ratio for this class in the first six months of
2006. Catastrophe losses had a 3.0 percentage point unfavorable impact on the combined ratio in
the first six months of 2005. Catastrophe losses represented 3.2 percentage points of the combined
ratio in the second quarter of 2006 compared with 4.7 percentage points in the same period of 2005.
Excluding the impact of catastrophes, the combined ratio was 75.6% in the first six months of 2006
and 77.7% in the second quarter compared with 67.8% and 66.6%, respectively, in 2005.

Page 22

Specialty Insurance

Net premiums from specialty insurance, which represented 24% of our premiums written in the
first six months of 2006, decreased by 2% in the first six months of 2006 and 1% in the second
quarter compared with the same periods a year ago. Net premiums written for the classes of
business within the specialty insurance segment were as follows:

Six Months Ended

Quarter Ended

June 30

% Incr.

June 30

% Incr.

2006

2005

(Decr.)

2006

2005

(Decr.)

(in millions)

(in millions)

Professional liability

$

1,271

$

1,337

(5

)%

$

656

$

691

(5

)%

Surety

148

105

41

83

52

60

Total specialty

$

1,419

$

1,442

(2

)

$

739

$

743

(1

)

Effective July 1, 2005, we sold the renewal rights on our hospital professional liability and
managed care errors and omissions business.
Excluding this business, our professional liability net premiums written in the first six months
and second quarter of 2006 were flat compared with the same periods in 2005. Competitive pressure
on rates and our commitment to maintain underwriting discipline continued to constrain growth in
the professional liability classes. Rates for most professional liability classes were stable in
the first half of 2006. However, rates in the for-profit directors and officers liability
component were modestly lower. Excluding the business that was sold, retention levels in the first
six months of 2006 were comparable to 2005 levels. New business volume in 2006 was also similar to
2005 levels. We continued to get adequate rates and favorable terms and conditions on both new
business and renewals. In line with our strategy in recent years, we continued to focus on
small and middle market publicly traded and privately held companies.

The significant growth in net premiums written for our surety business in the first six months
of 2006 was due in large part to the non-renewal during 2005 of a high excess reinsurance treaty.
Growth in the second quarter was also due to an increase in business from existing customers.

Our specialty insurance business produced profitable underwriting results in the first six
months and second quarter of 2006 compared with modestly unprofitable results in the first six
months of 2005 and modestly profitable results in the second quarter of 2005. The combined loss
and expense ratios for the classes of business within the specialty insurance segment were as
follows:

Periods Ended June 30

Six Months

Second Quarter

2006

2005

2006

2005

Professional liability

93.7

%

101.5

%

92.0

%

101.4

%

Surety

48.0

101.3

58.7

54.2

Total specialty

89.8

%

101.6

%

89.0

%

98.3

%

Page 23

Our professional liability business improved substantially in the first six months and second
quarter of 2006, producing profitable results compared with modestly unprofitable results in the
similar periods of 2005. Results in both years benefited from the cumulative effect of price
increases, lower policy limits and better terms and conditions in recent years. Results in 2006
also benefited from favorable loss development in the second quarter related to prior accident
years. Conversely, results in the 2005 periods were adversely affected by unfavorable loss
development related to accident years 2002 and prior. The adverse development was predominantly
from claims that arose due to corporate failures and allegations of management misconduct and
accounting irregularities. The fidelity component of our professional liability business was highly
profitable in the first six months and second quarter of both years.

Surety results were highly profitable in the first six months of 2006 compared with
near-breakeven results in the same period in 2005. Results were highly profitable in the second
quarter of both years. Our surety business tends to be characterized by infrequent but potentially
high severity losses. Results in the first six months of 2005 were adversely affected by one $60
million loss in the first quarter.

Reinsurance Assumed

Net premiums from our reinsurance assumed business, which represented 4% of premiums written
in the first six months of 2006, decreased by 48% in the first six months of 2006 and 51% in the
second quarter compared with the similar periods in 2005. This significant decrease in premiums
was expected in light of the sale in December 2005 of our continuing reinsurance assumed business,
including renewal rights, to Harbor Point Limited. Harbor Point has the right for a transition
period of up to two years to underwrite specific reinsurance business on our behalf. We retain a
portion of such business and cede the balance to Harbor Point in return for a fronting commission.

The combined loss and expense ratio for our reinsurance assumed business was 100.4% in the
first six months of 2006 and 105.1% in the second quarter compared with 89.6% and 91.3%,
respectively, in the prior year. Results in 2006 were adversely affected by the substantial
decline in premiums without a commensurate decrease in expenses. Results in 2005 benefited from
the favorable settlement of one loss in the first quarter and the commutation of a contract in the
second quarter.

Regulatory Developments

To promote and distribute our insurance products, we rely on independent brokers and agents.
Accordingly, our business is dependent on the willingness of these brokers and agents to recommend
our products to their customers. We
have agreements in place with certain insurance agents and brokers under which, in addition to the
standard commissions that we pay, we have agreed to pay commissions that are contingent on the
volume and/or the profitability of business placed with us.

Page 24

We are involved in the ongoing investigations of certain business practices in the property
and casualty insurance industry by various Attorneys General and other regulatory authorities of
several states, the U.S. Securities and Exchange Commission, the U.S. Attorney for the Southern
District of New York and certain non-U.S. regulatory authorities with respect to, among other
things,
(1) potential conflicts of interest and anti-competitive behavior arising from the payment of
contingent commissions to brokers and agents and (2) loss mitigation and finite reinsurance
arrangements. In connection with these investigations, we have received subpoenas and requests for
information from various regulators. We are cooperating fully with these investigations. Although
no regulatory action has been initiated against us, it is possible that one or more regulatory
authorities will bring an action against us with respect to some or all of the issues that are the
focus of these ongoing investigations.
In May 2006, we were informed by the Attorney General of the State of Ohio that he intended to file
an action against several industry participants, including us, with respect to certain of these issues. No
such action has been filed to date. Chubb and certain of its subsidiaries have been named in legal
proceedings brought by private plaintiffs arising out of these investigations. These legal
proceedings are further described in Note (6) of the Notes to Consolidated Financial Statements.

As a result of the investigations referred to above, a few major insurance companies have
entered into settlement agreements with some of the regulators with respect to some of the issues
under investigation. Pursuant to these settlements, the companies involved agreed to pay
substantial amounts in settlement. These companies are also prohibited from paying contingent
commissions relating to the placement of any excess casualty insurance policy through 2008. In
addition, these companies have agreed not to pay contingent commissions on any line of business,
product or segment if any of the settling Attorneys General determine that more than 65% of the
annual U.S. premiums for insurance in that line, product or segment were written by insurers who
either (1) do not pay contingent commissions in that line, product or segment or
(2) have signed an agreement with an Attorney General containing this requirement. These
companies are also required to support legislation and regulation
to abolish contingent commissions and increase disclosure of compensation paid to agents and
brokers. At least one of these companies has also agreed to require agents and brokers to make
certain disclosures to insureds regarding compensation received in connection with the placement or
renewal of insurance. Certain brokers and agents also have entered into settlement agreements with
various regulators pursuant to which they have agreed not to accept contingent commissions for some
or all lines of business. Other industry participants may enter into similar or different
settlements in the future.

In addition, a number of states have announced that they are looking at compensation
arrangements and considering regulatory action or reform in this area. The rules that would be
imposed if these actions or reforms were adopted range in nature from disclosure requirements to
prohibition of certain forms of compensation to imposition of new duties on agents, brokers or
insurance
companies in dealing with customers. These or other developments may require changes to market
practices relative to contingent commissions. It is possible
that changes to the manner in which we interact with and compensate brokers and
agents and the extent to which insurance industry participants respond to or implement the business
changes outlined above could have a material adverse impact on our ability to renew business or
write new business, which could have a material adverse effect on our results of operations or
financial condition.

Page 25

We cannot predict at this time the ultimate outcome of the investigations and legal
proceedings referred to above, including any potential amounts that we may be required to pay in
connection with them. However, it is possible that such payments could have a material adverse
effect on our results of operations in particular quarterly or annual periods.

Loss Reserves

Unpaid losses and loss expenses, also referred to as loss reserves, are the largest liability
of our property and casualty business.

Our loss reserves include the accumulation of individual case estimates for claims that have
been reported and estimates of claims that have been incurred but not reported as well as estimates
of the expenses associated with processing and settling all reported and unreported claims.
Estimates are based upon past loss experience modified for current trends as well as prevailing
economic, legal and social conditions. Our loss reserves are not discounted to present value.

We regularly review our loss reserves using a variety of actuarial techniques. We update the
reserve estimates as historical loss experience develops, additional claims are reported or settled
and new information becomes available. Any changes in estimates are reflected in operating results
in the period in which the estimates are changed.

Our loss reserves include significant amounts related to asbestos and toxic waste claims,
Hurricane Katrina and the September 11, 2001 attack. The components of our loss reserves were as
follows:

June 30,

December 31,

2006

2005

(in millions)

Gross loss reserves

Related to asbestos and toxic
waste claims

$

1,059

$

1,121

Related to Hurricane Katrina

526

967

Related to September 11 attack

399

413

All other loss reserves

20,602

19,981

22,586

22,482

Reinsurance recoverable

Related to asbestos and toxic
waste claims

49

50

Related to Hurricane Katrina

403

756

Related to September 11 attack

348

354

All other reinsurance recoverable

2,352

2,609

3,152

3,769

Net loss reserves

$

19,434

$

18,713

Page 26

We have settled a large percentage of our claims from Hurricane Katrina. As a result, there
have been many adjustments, both favorable and unfavorable, to our loss estimates for individual
claims. In the first six months of 2006, these adjustments produced a $150 million reduction in
our gross loss estimate and a related $145 million reduction in reinsurance recoverable.

The components of our net loss reserves were as follows:

June 30,

December 31,

2006

2005

(in millions)

Reserves related to asbestos and toxic
waste claims

$

1,010

$

1,071

Reserves related to Hurricane Katrina

123

211

Reserves related to September 11 attack

51

59

All other loss reserves

Personal insurance

1,691

1,692

Commercial insurance

7,888

7,475

Specialty insurance

7,274

6,827

Reinsurance assumed

1,397

1,378

Net loss reserves

$

19,434

$

18,713

Loss reserves, net of reinsurance recoverable, increased by $721 million during the first six
months of 2006. The loss reserves related to asbestos and toxic waste claims, Hurricane Katrina
and the September 11 attack are significant components of our total loss reserves, but they may
distort the growth trend in the loss reserves. Excluding such loss reserves, our net loss reserves
increased by $878 million during the first six months of 2006. The most significant increases
occurred in the long tail liability classes of business within commercial and specialty insurance.

Based on all information currently available, we believe that the aggregate loss reserves of
our property and casualty subsidiaries at June 30,
2006 were adequate to cover claims for losses that had occurred, including both those known to us
and those yet to be reported. In establishing such reserves, we consider facts currently known and
the present state of the law and coverage litigation. However, given the judicial decisions and
legislative actions that have broadened the scope of coverage and expanded theories of liability in
the past and the possibilities of similar interpretations in the future, particularly as they
relate to asbestos claims and, to a lesser extent, toxic waste claims, it is possible that
managements estimate of the ultimate liability for losses that had occurred as of June 30, 2006
may increase in future periods. Such increases in estimates could have a material adverse effect
on the Corporations future operating results. However, management does not expect that any such
increases would have a material adverse effect on the Corporations consolidated financial
condition or liquidity.

Investment Results

Property and casualty investment income before taxes increased by 11% in the first six months
of 2006 and 10% in the second quarter compared with the same periods in 2005. Growth was due to an
increase in invested assets since the second quarter of 2005. The increase in invested assets was
due to substantial cash flow from operations over the period.

Page 27

The effective tax rate on investment income was 19.7% in the first six months of 2006 compared
with 19.6% in the same period in 2005. The effective tax rate fluctuates as a result of our
holding a different proportion of our investment portfolio in tax-exempt securities during each
period.

On an after-tax basis, property and casualty investment income increased by 11% in the first
six months of 2006 and 10% in the second quarter. Management uses property and casualty investment
income after tax, a non-GAAP financial measure, to evaluate its investment performance because it
reflects the impact of any change in the proportion of the investment portfolio invested in tax
exempt securities and is therefore more meaningful for analysis purposes than investment income
before income tax.

Corporate and Other

Corporate and other includes investment income earned on corporate invested assets, interest
expense and other expenses not allocated to our operating subsidiaries and the results of our real
estate and other non-insurance subsidiaries. It also includes income from our investment in Allied
World Assurance Company, Ltd.

Corporate and other results include the results of Chubb Financial Solutions (CFS), which were
previously reported separately. CFSs business was primarily structured credit derivatives,
principally as a counterparty in portfolio credit default swaps. CFS has been in run-off since
April 2003.

Corporate and other produced a loss before taxes of $54 million in the first six months of
2006 compared with a loss of $87 million in the first six months of 2005. The higher loss in 2005
was due to the recognition in the first quarter of a $43 million real estate impairment loss, which
is discussed below.
In the first six months of 2006, we recognized near breakeven results from our investment in Allied
World compared with income in the first six months of 2005.

Real Estate

Our real estate operations had a loss before taxes of $2 million in the first six months of
2006 compared with a loss of $46 million in the first six months of 2005. These results are
included in the corporate and other results.

During the first quarter of 2005, we committed to a plan to sell a parcel of land in New
Jersey that we had previously intended to hold and develop. The
decision to sell the property was based on our assessment of the current real
estate market and our concern about zoning issues. As a result of our decision to sell this
property, we reassessed the recoverability of its carrying value. Based on our reassessment, we
recognized an impairment loss of $43 million to reduce the carrying value of the property to its
estimated fair value.

In addition to the aforementioned parcel of land that we plan to sell, we own approximately
$155 million of land that we expect will be developed in the future. Our real estate assets also
include approximately $130 million of commercial properties and land parcels under lease.

Page 28

The recoverability of the carrying value of our real estate assets, other than the parcel of
land that we plan to sell, is assessed based on our ability to fully recover costs through a future
revenue stream. The assumptions used reflect future improvement in demand for office space, an
increase in rental rates and the ability and intent to obtain financing in order to hold and
develop such remaining properties and protect our interests over the long term. Management believes
that it has made adequate provisions for impairment of real estate assets. However, if the assets
are not sold or developed or if leased properties do not perform as presently contemplated, it is
possible that additional impairment losses may be recognized that would have a material adverse
effect on the Corporations results of operations.

Chubb Financial Solutions

Portfolio credit default swaps are derivatives and are carried in the financial statements at
estimated fair value, which represents managements best
estimate of the cost to exit our positions. Changes in fair value are included in income in the
period of the change. CFS had breakeven results in the first six months of 2006 and 2005.

CFSs aggregate exposure, or retained risk, from each of its in-force portfolio credit default
swaps is referred to as notional amount. Notional
amounts are used to express the extent of involvement in swap transactions.
These amounts are used to calculate the exchange of contractual cash flows and are not necessarily
representative of the potential for gain or loss. The notional amounts are not recorded on the
balance sheet.

The notional amount of CFSs credit default swaps was $1.1 billion at
June 30, 2006. Our realistic loss exposure is a very small portion of the
$1.1 billion notional amount as our position is senior to subordinated interests of about $.5
billion in the aggregate. In addition, using our internal ratings models, we estimate that the
credit ratings of the individual portfolio credit default swaps at June 30, 2006 were AAA.

In addition to portfolio credit default swaps, CFS entered into a derivative contract linked
to an equity market index that terminates in 2012 and a few other insignificant transactions.

The notional amount and fair value of our future obligations under derivative contracts by
type of risk were as follows:

Notional Amount

Fair Value

June 30,

December 31,

June 30,

December 31,

2006

2005

2006

2005

(in billions)

(in millions)

Credit default swaps

Corporate securities

$

.2

$

.2

$

1

$

1

Asset-backed securities

.9

.8

1

1

1.1

1.0

2

2

Other

.3

.3

7

7

$

1.4

$

1.3

$

9

$

9

Page 29

Realized Investment Gains and Losses

Net investment gains realized were as follows:

Periods Ended June 30

Second Quarter

Six Months

2006

2005

2006

2005

(in millions)

Net realized gains (losses)

Equity securities

$

56

$

52

$

162

$

104

Fixed maturities

(6

)

3

(4

)

(4

)

50

55

158

100

Other than temporary
impairment

Equity securities

7



7



Fixed maturities

1

2

3

2

8

2

10

2

Realized investment gains
before tax

$

42

$

53

$

148

$

98

Realized investment gains
after tax

$

27

$

34

$

96

$

63

Of the net realized gains on equity securities, $142 million and
$96 million in the first six months of 2006 and 2005, respectively, related to our share of gains
recognized by limited partnerships in which we have an interest.

We regularly review those invested assets whose fair value is less than cost to determine if
an other than temporary decline in value has occurred. In evaluating whether a decline in value of
any investment is temporary or other than temporary, we consider various quantitative criteria and
qualitative factors including the length of time and the extent to which the fair value has been
less than the cost, the financial condition and near term prospects of the issuer, whether the
issuer is current on contractually obligated interest and principal payments, our intent and
ability to hold the investment for a period of time sufficient to allow us to recover our cost,
general market conditions
and industry or sector specific factors. If a decline in the fair value of an individual security
is deemed to be other than temporary, the difference between cost and estimated fair value is
charged to income as a realized investment loss. The fair value of the investment becomes its new
cost basis.

Income Taxes

In connection with the sale of a subsidiary a number of years ago, we agreed to indemnify the
buyer for certain pre-closing tax liabilities. During the first quarter of 2005, we settled this
obligation with the purchaser. Accordingly, we reduced our income tax liability, which resulted in
the recognition of a benefit of $22 million.

Capital Resources and Liquidity

Capital resources and liquidity represent the overall financial strength of the Corporation
and its ability to generate cash flows from its operating
subsidiaries, borrow funds at competitive rates and raise new capital to meet operating and growth
needs.

Page 30

Capital Resources

Capital resources provide protection for policyholders, furnish the financial strength to
support the business of underwriting insurance risks and
facilitate continued business growth. At June 30, 2006, the Corporation had shareholders equity
of $12.6 billion and total debt of $2.5 billion.

The Board of Directors approved a two-for-one stock split in the form of a stock dividend
payable to shareholders of record on March 31, 2006. Share and per share amounts have been
adjusted to reflect the stock split.

In June 2003, Chubb issued $460 million of unsecured 2.25% senior notes due August 16, 2008
and 18.4 million purchase contracts to purchase Chubbs common stock on or before August 16, 2006.
The notes and purchase contracts were issued together in the form of 7% equity units. Each equity
unit initially represented one purchase contact and $25 principal amount of notes. In May 2006,
the notes were successfully remarketed as required by their terms. The interest rate on the notes
was reset to 5.472% from 2.25%, effective May 16, 2006. The remarketed notes are due August 16,
2008. We did not receive any proceeds from the remarketing of the notes. Instead, the proceeds
from the remarketing will be used to satisfy the holders obligation under the purchase contracts
to purchase Chubbs common stock on August 16, 2006.

Management regularly monitors the Corporations capital resources. In connection with our
long-term capital strategy, Chubb from time to time contributes capital to its property and
casualty subsidiaries. In addition, in
order to satisfy capital needs as a result of any rating agency capital adequacy or other future
rating issues, or in the event we were to need additional capital to make strategic investments in
light of market opportunities, we may take a variety of actions, which could include the issuance
of additional debt and/or equity securities.

In June 2003, a shelf registration statement that Chubb filed in March 2003 was declared
effective by the Securities and Exchange Commission. Under the registration statement, up to $2.5
billion of various types of securities may be issued. At June 30, 2006, approximately $650 million
remained under the shelf registration statement.

In December 2005, the Board of Directors authorized the repurchase of up to 28,000,000 shares
of Chubbs common stock. The authorization has no expiration date.

In January 2006, we repurchased 5,100,000 shares of our common stock under an accelerated
stock buyback program at an initial price of $48.91 per share, for a total cost of $249 million.
The program was completed in March, at which time, under the terms of the agreement, we received a
price adjustment based on the volume weighted average price of Chubbs common stock during the
program period. The price adjustment could be settled, at our election, in Chubbs common stock or
cash. We elected to have the counterparty deliver 125,562 additional shares in settlement of the
price adjustment. In the second quarter of 2006, we repurchased 5,772,800 shares in open market
transactions at a cost of $290 million.

As of June 30, 2006, 14,213,838 shares remained under the share repurchase authorization.
Based on our outlook for 2006, we expect to repurchase all of the shares remaining under this
authorization by the end of 2006.

Page 31

Ratings

Chubb and its insurance subsidiaries are rated by major rating agencies. These ratings
reflect the rating agencys opinion of our financial strength, operating performance, strategic
position and ability to meet our obligations to policyholders.

Ratings are an important factor in establishing our competitive position in the insurance
markets. There can be no assurance that our ratings will
continue for any given period of time or that they will not be changed.

It is possible that positive or negative ratings actions by one or more of the rating agencies
may occur in the future. If our ratings were downgraded, we may incur higher borrowing costs and
may have more limited means to access capital. In addition, a downgrade in our financial strength
ratings could adversely affect the competitive position of our insurance operations, including a
possible reduction in demand for our products in certain markets.

Liquidity

Liquidity is a measure of our ability to generate sufficient cash flows to meet the short and
long term cash requirements of our business operations.

Our property and casualty operations provide liquidity in that premiums are generally received
months or even years before losses are paid under the policies purchased by such premiums.
Historically, cash receipts from operations, consisting of insurance premiums and investment
income, have provided more than sufficient funds to pay losses, operating expenses and dividends to
Chubb. After satisfying our cash requirements, excess cash flows are used to build the investment
portfolio and thereby increase future investment income.

Our strong underwriting results continued to generate substantial new cash. New cash from
operations available for investment by our property and casualty subsidiaries was approximately
$1.0 billion in the first six months of 2006 compared with $1.6 billion in the same period in 2005.
New cash available was lower in 2006 due primarily to loss payments during the first six months
for which the related reinsurance recoverable has not yet been received as well as lower premium
receipts and higher income tax payments compared with the 2005 period.

Chubbs liquidity requirements in the past have been met by dividends from its property and
casualty subsidiaries and the issuance of commercial paper and debt and equity securities. It is
expected that Chubbs liquidity requirements in the future will be met by these sources of funds or
borrowings from our credit facility.

Page 32

Invested Assets

The main objectives in managing our investment portfolios are to maximize after-tax investment
income and total investment returns while minimizing credit risks in order to provide maximum
support to the insurance underwriting operations. Investment strategies are developed based on
many factors including
underwriting results and our resulting tax position, regulatory requirements, fluctuations in
interest rates and consideration of other market risks.
Investment decisions are centrally managed by investment professionals based on guidelines
established by management and approved by the boards of directors of Chubb and the respective
operating companies.

Our investment portfolio is primarily comprised of high quality bonds, principally tax exempt,
U.S. Treasury and government agency, mortgage-backed
securities and corporate issues as well as foreign bonds that support our international operations.
In addition, the portfolio includes equity securities, primarily publicly traded common stocks and
private equity limited partnerships, held primarily with the objective of capital appreciation.

In the first six months of 2006, we invested new cash primarily in tax exempt bonds. To a
lesser extent, we also invested in taxable bonds, primarily foreign corporate bonds, and equity
securities. Our objective is to achieve the appropriate mix of taxable and tax exempt securities
in our portfolio to balance both investment and tax strategies.

The unrealized depreciation before tax of investments carried at market value, which includes
fixed maturities classified as available-for-sale and
equity securities, was $169 million at June 30, 2006 compared with unrealized appreciation before
tax of $478 million at December 31, 2005. Such unrealized depreciation or appreciation is
reflected in a separate component of other comprehensive income, net of applicable deferred income
tax.

The unrealized market appreciation before tax of those fixed maturities carried at amortized
cost was $8 million at June 30, 2006 and $11 million at December 31, 2005. Such unrealized
appreciation was not reflected in the consolidated financial statements.

Changes in unrealized market appreciation or depreciation of fixed maturities were due
primarily to fluctuations in interest rates.

Page 33

Item 4  Controls and Procedures

As of June 30, 2006, an evaluation of the effectiveness of the design and operation of the
Corporations disclosure controls and procedures was performed under the supervision and with the
participation of the Corporations management, including the chief executive officer and chief
financial officer. Based on that evaluation, the chief executive officer and chief financial
officer concluded that the Corporations disclosure controls and procedures were effective as of
the evaluation date.

During the quarter ended June 30, 2006, there were no changes in internal control over
financial reporting that have materially affected, or are reasonably likely to materially affect,
the Corporations internal control over financial reporting.

Page 34

PART II. OTHER INFORMATION

Item 1  Legal Proceedings

A discussion of material developments in legal proceedings is included in the
Corporations Quarterly Report on Form 10-Q for the quarter ended March 31, 2006.

Item 1A  Risk Factors

Our business is subject to a number of risks, including those identified in Item 1A of our
2005 Annual Report on Form 10-K and of our Quarterly Report on Form 10-Q for the quarter ended
March 31, 2006 filed with the U.S. Securities and Exchange Commission as supplemented below, that
could have a material effect on our business, results of operations, financial condition and/or
liquidity and that could cause our operating results to vary significantly from period to period.
The risks described in our Annual Report on Form 10-K and Quarterly Reports on Form 10-Q are not
the only risks we face. Additional risks and uncertainties not currently known to us or that we
currently deem to be immaterial also could have a material effect on our business, results of
operations, financial condition and/or liquidity.

We have exposure for claims related to allegedly improper stock option grant practices of some of
our insureds; we cannot predict at this time the impact that such claims may have on our results of
operations.

We have received a number of claims, and may receive additional claims, with respect to
allegedly improper stock option grant practices by certain of our insureds, including alleged
backdating of options. Our exposure with respect to these claims is
uncertain and is subject to resolution of several issues, including the scope of coverage, policy
exclusions and coverage defenses. We cannot predict at this time the number of claims that we may
receive or the impact that these claims may have on our results of operations.

Page 35

Item 2  Unregistered Sales of Equity Securities and Use of Proceeds

The following table summarizes Chubbs stock repurchased each month in the quarter ended June
30, 2006.

Total Number of

Maximum Number of

Shares Purchased

Shares that May

Total Number

Average

as Part of

Yet Be Purchased

of Shares

Price Paid

Publicly Announced

Under the

Purchased(a)

Per Share

Plans or Programs

Plans or Programs(b)

Period

April 2006



$





19,986,638

May 2006

2,669,500

51.13

2,669,500

17,317,138

June 2006

3,103,300

49.43

3,103,300

14,213,838

Total

5,772,800

50.22

5,772,800

(a)

The stated amounts exclude 61,079 shares, 136,449 shares and 11,252 shares delivered to
Chubb during the months of April 2006, May 2006 and June 2006, respectively, by employees of
the Corporation to cover option exercise prices and withholding taxes in connection with the
Corporations stock-based employee compensation plans.

(b)

On December 8, 2005, the Board of Directors authorized the repurchase of up to 28,000,000
shares of common stock. The authorization has no expiration date.

Item 4  Submission of Matters to a Vote of Security Holders

Information regarding the matters submitted to a vote of Chubbs security holders at Chubbs
annual meeting conducted on April 25, 2006, including the voting results relating thereto, is set
forth in Item 8.01 of Chubbs current report on Form 8-K filed with the Securities and Exchange
Commission on April 28, 2006. Item 8.01 of this Form 8-K is incorporated herein by reference.

Page 36

Item 6  Exhibits

Exhibit

Number

Description



Rule 13a-14(a)/15d-14(a) Certifications.

31.1

Certification by John D. Finnegan filed herewith.

31.2

Certification by Michael OReilly filed herewith.



Section 1350 Certifications.

32.1

Certification by John D. Finnegan filed herewith.

32.2

Certification by Michael OReilly filed herewith.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934,
The Chubb Corporation has duly caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.